The European Commission has announced the revised Common Consolidated Corporate Tax Base (CCCTB), a new plan to improve the way in which companies are taxed in the Single Market.
The EU’s aim is to make it easier and cheaper to do business and to act against tax avoidance by implementing new strategies, for example:
1. Obligating companies to have a single rulebook for calculating their taxable profits throughout the EU;
2. Eliminating mismatches between national taxation systems which aggressive tax planners currently exploit;
3. Removing primary vehicles for tax avoidance – transfer pricing and preferential regimes;
4. Addressing the bias in the tax system towards debt over equity by providing an allowance for equity issuance which will encourage companies to seek more stable sources of financing and to tap capital markets;
5. Taxing companies with global revenues exceeding €750 million a year where they really make their profits and tackling loopholes currently associated with profit-shifting for tax purposes;
6. Providing benefits in terms of financial stability for companies with a stronger capital base.
Although corporate tax rates are not covered by the CCCTB, the new strategy will create a more transparent, efficient and fair system for calculating the tax base of cross-border companies and will stop them from shifting profits to non-EU countries.
Companies will now be able to file one tax return for all of their EU activities which will decrease the time spent on annual compliance and setting up a subsidiary. Companies will also be able to offset profits in one member state against losses in another.
These proposals will be submitted to the European Parliament for consultation and to the Council for adoption.